4 ways to protect your business from copycats

It’s enough to put any CMO in a cold sweat, or a furious rage. This month at the Guangzhou motor show, Chinese carmaker LandWind launched its X7 model, which struck an uncanny similarity to Range Rover's Evoque.

(Read: Land Rover “will take whatever steps” to confront IP breach)

Its unveiling revived counterfeit discussion and CMOs would do well to take note. No one who sells in China is exempt.

While the battleground has largely been an online one, it now seems the war is being waged at car shows too.

For a while there, we had good news. Sites like Jumei.com had entered the battle to take a stand against retailers selling counterfeits products.

In this ongoing war, China’s sophisticated criminal enterprises are driving counterfeit operations with large organized suppliers and Internet-based businesses veiled by B2B and B2C websites.

The online flow of counterfeit goods has grown
so swiftly over the past few years that experts predict the online trade of counterfeit goods in China will surpass the physical trade of such goods in
the next two or three years.

It’s a business problem that previously may have seemed impossible to solve, but that’s no longer the case. The big question is, what can brands and Brand Directors do counter the counterfeiters?

There are, however, certain steps that all companies can and should take, Bob Youill, senior managing director global risk and investigation practice at FTI Consulting recommends:

1. Declare your intellectual property

An effective anti-counterfeiting strategy for China begins with registering the relevant intellectual property rights in China, as China does not automatically recognize IP rights registered overseas or in Hong Kong. Even if a trademark is registered under the Berne Convention for the Protection of Literary and Artistic Works, Chinese authorities may be reluctant to assist in enforcing an infringement claim.

2. Quantify the risk to your brand

Counterfeit goods erode brand value
and can hinder a company’s attempts to grow in new markets. Once aware that goods are being counterfeited in China, in-house counsel first should consider the company’s brand protection strategy.

3. Pick your best course of action

Counterfeiting in China frequently is conducted or facilitated by large, sophisticated networks. Accordingly, it
is most cost-effective first to discover where goods accumulate, for example with packaging and assembly providers, and then develop a hit list of offenders.

This allows the rights owner to conduct higher impact enforcement actions rather than multiple, smaller scale raids on individual vendors.

When considering tackling organized counterfeiting operations, the first target should be any joint venture or other commercial partner on the ground in China, as well as the local senior management team. This is done to eliminate the possibility of these close parties being involved, but this is where large-scale counterfeiting
operations often begin. Of course, this should be done discreetly.

4. Prepare to work with the authorities

Handing over materials to Chinese authorities begins another phase of a company’s anti-counterfeiting program. There are a number of risks to manage such as controlling sensitive corporate information, fulfilling government requests for documents, overseeing internal reporting and complying with reporting rules.

Multinational corporations in China often find it helpful to have both international and local counsel collaborating on a case to manage these risks.

Bob Youill is senior managing Director, global risk and investigations practice at FTI Consulting.

Photo courtesy to shutterstock.